It’s been another volatile week for Sterling, as the fallout from a host of key economic decisions continues. The movement seen on the markets over the past couple of weeks has thrown many investors, with aggressive spikes amongst the majority of the regularly traded currency pairs.
GBP/EUR has hit a fresh 7 year high this week, following the Greek election results and it is likely we will see further fallouts over the coming weeks & months. With the new government’s anti-austerity stance, it is likely the new Greek Prime minister is on a collision course with Angela Merkel and other Eurozone heavyweights, as they attempt to renegotiate their bailout package.
Focus will also be on the European Central Bank (ECB) following their decision to inject up to 1.3 trillion EUR into the Eurozone economy over the next two years in the hope this will counter deflation (when the inflation level falls below 0%) across the region.
It is easy to assume under the current economic conditions that the Pound will continue on its upward curve against the EUR but a word of caution to those holding out for 1.35. The latest Bank of England (BoE) minutes indicated there are no longer any members voting for a UK interest rate hike and this is likely to dampen expectations moving forward. This was a key topic last year and every time it was talked down the Pound lost value and I believe the BoE will utilise this again to try and control Sterling’s value. We also need to look at the UK Manufacturing sector which has slowed during the last couple of months and this could have been a key reason the recent UK Gross Domestic Product (GDP) figures, came out lower than expected.
Personally I feel whilst we continue to trade above 1.30 against the EUR, we are doing better than we should be and I would be tempted to take advantage of the 7 year high, rather than gamble on GBP gaining further momentum.
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